Best Buy’s 28.9% return over the past six months has outpaced the S&P 500 by 15.4%, and its stock price has climbed to $83.62 per share. This performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Best Buy, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Best Buy Will Underperform?
We’re happy investors have made money, but we’re passing on Best Buy for now. Here are three reasons we avoid BBY, plus one stock we’d rather own.
1. Stores Are Closing, a Headwind for Revenue
The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.
Best Buy listed 1,065 locations in the latest quarter and has generally closed its stores over the last two years, averaging 1.9% annual declines.
When a retailer shutters stores, it usually means that brick-and-mortar demand is less than supply, and it is responding by closing underperforming locations to improve profitability.
2. Flat Same-Store Sales Indicate Weak Demand
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Best Buy’s demand within its existing locations has barely increased over the last two years as its same-store sales were flat.
3. Low Gross Margin Reveals Weak Structural Profitability
At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.
Best Buy has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 22.6% gross margin over the last two years. Said differently, Best Buy had to pay a chunky $77.44 to its suppliers for every $100 in revenue.
Final Judgment
Best Buy falls short of our quality standards. With its shares outperforming the market lately, the stock trades at 12.3× forward P/E (or $83.62 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are more exciting stocks to buy at the moment. We’d recommend looking at one of our top digital advertising picks.
Stocks We Would Buy Instead of Best Buy
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
